Nalivka: Train With Regulations To Higher Food Costs Left The Station

Capitalism creates the best possible situation for both business and the environment, and has produced sustainable agricultural production for 100 years.
( Wyatt Bechtel )

Knowing where your food comes from has become increasingly important to many consumers. We all know this. However, this quality trait is rapidly moving toward a requirement and the term requirement can be further interpreted as regulation. Something as non-intrusive as voluntary source verification is only the starting point to where U.S. agriculture and the food industry seems to be headed. When the concept of sustainability is joined with the environment, the train has left the station.

The demands on U.S. agriculture from every perspective are increasing. The regulatory burden adds costs to every farm and ranch in this country that produces food. And, I might add that for the U.S. consumer, food represents a relatively small share of disposable income – about 8 - 10%. Nowhere in the world do consumers spend so little on food relative to their incomes. Furthermore, I sense a somewhat ambivalent attitude from U.S. consumers toward that fact. Maybe that is okay. I am inclined to believe that at some point it won’t be okay.

Currently I believe only those consumers preferring to buy organically produced food are the ones willing and able to pay a price that begins to include some of the true cost of production. While they are willing to pay that higher price, they also represent a small share of total consumers – maybe 5%-10%. Perhaps the trend of retailers increasingly filling shelf space with higher-priced organic items as the only option will continue to grow and eventually with no comparison, the higher price is okay with everyone.

I have said repeatedly that sustainability is closely linked to profitability. The business model in a capitalistic society must be profitable to be sustainable – period. Sustainability is long-term survival and includes all aspects of your business which in agriculture is linked to natural resources – land and water. If you don’t manage those resources for the long term, the sustainability of both the resource and your ranch or farm will both fail.

I am concerned about the end game that U.S. agriculture faces as sustainability is more closely linked to only the environment. Think cap and trade schemes to reduce carbon dioxide and ultimately the use of fossil fuels. The Oregon legislature and supporters of the Green New Deal certainly do! As costs of production increase and margins shrink, consolidation will increase in order to address those shrinking margins. And, at some point, consumer prices will increase - significantly.

Capitalism by its very nature creates the best possible situation for both business and the environment. It has produced sustainable U.S. agricultural production for 100 years. But, sustainability is the most pressing issue facing agriculture today – not for the environment but the sustainability of U.S. farmers and ranchers who produce the most abundant, safe, quality, affordable supply of food in the world.